We are now entering no man's land. That is the period just between earnings season where the market tends to drift lower. The market has had this tendency since the rally started, where stocks rise during earnings releases due to better than expected results, then correct as earnings expectations get reduced between quarters, only to rally again as earnings season starts again.
The only difference now is that stocks are well overdue for a correction so we will either not see the pullback people are expecting, or we will get a steeper correction than expected which will scare the bejesus out of investors into thinking it's the end of the world as we know it. Because the market likes to do whatever it takes to make the most people wrong, my inclination is that we will get both, a longer than usual rally followed by a harrowing correction.
However, the overall trend is still your friend. World central banks have injected over $15 trillion of liquidity into global systems since 2009, and all of this liquidity will keep the market from falling off a cliff. Simply, you don't fight the Fed(s). The entire world's stock markets are currently a combined $48 trillion, which means central banks now equal one-third of the world equity values.
This increasing liquidity will continue to debase world currencies and push commodities higher. Now is a good time to buy gold and silver to through the SPDR Gold Shares (NYSEARCA:GLD), Market Vectors Gold Miners ETF (NYSEARCA:GDX), Newmont Mining Corp. (NYSE:NEM), Goldcorp. (NYSE:GG), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), PowerShares DB Gold Double Long ETN (NYSEARCA:DGP) for the not so faint of heart, plus Silver Wheaton Corp. (NYSE:SLW) and ProShares Ultra Silver (NYSEARCA:AGQ) and Fortuna Silver Mines (NYSE:FSM).
The correction may have begun last week when stocks and gold dropped when Fed Chairman Ben Bernanke's disappointed equity investors by not mentioning a QE3, even though this recent speech was virtually identical to the last and that he did make the case for a continued accommodative monetary stance. Never mind that the only reason he wouldn't come through with more stimulus is if the economy were truly recovering. If there was any question in anyone's mind that this aging bull was not powered by the flow of free money, that thought should have vanished by now.
This will buoy stocks and the more Growth oriented investors can buy SPDR S & P 500 (NYSEARCA:SPY), SPDR Select Sector Fund - Financial (NYSEARCA:XLF), iShares MSCI Emerging Index Fund (NYSEARCA:EEM), Emerging Markets Consumer ETF (NYSEARCA:ECON), PowerShares QQQ Trust, Series 1 (NASDAQ:QQQ), iShares Russell 2000 (NYSEARCA:IWM) and iShares FTSE China 25 Index Fund (NYSEARCA:FXI). More aggressive investors will still want to stick with the big daddy's like Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Intel Corporation (NASDAQ:INTC), Microsoft (NASDAQ:MSFT), Cisco Systems (NASDAQ:CSCO), Dell (NASDAQ:DELL), Caterpillar (NYSE:CAT), General Electric (NYSE:GE) and Yahoo (NASDAQ:YHOO).
Of course, the Fed will keep borrowing on credit to stimulate the economy further as long as it can. Perhaps with luck, we'll get past the election, which is probably the goal. Unfortunately, more debt cannot solve a debt problem and all this comes on top of an already massively over-leveraged and rapidly aging population which naturally spends less as it gets older. The government can stimulate all it wants to offset this, but debt eventually has to be paid back … which, I know, is a surprise to many. These very issues as well as specifically what investors need to do about it, are fully discussed in the book, "Facing Goliath: How to Triumph in the Dangerous Market Ahead," a must read for any and all who hopes to retire in the next 5-10 years or is already in their golden years and wants to protect and grow their families nest egg.
There are plenty of places to make money in this market if you know where to look. While some nimble traders might attempt to time the short-term swings in the market, we prefer to remain alert to the primary trend and focus on investments that get the best returns with the least risk possible for our clients. Yields of 8-10% are available, so why take all the risk if you don't need to? Keep in mind the mantra I reiterate on Smart Money radio every week - Invest for need, not for greed. With that in mind, moderate investors should focus on preferreds and corporate bonds, where yields are the best.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.